With Commencement of the New Companies Act, 2013 The one of the very important provision which brings huge impact on the Auditors of the Company and determine the Duration of Auditors in a Company and restrict them to Audit in one Company for long duration was section 139 of the Companies Act, 2013.
Appointment of First Auditor of the Company:
The First Auditor Shall be appointed in the Board Meeting in the Company within 30 days from the Incorporation of the Company
In the case of failure of the Board to appoint such auditor, it shall inform the members of the company, who shall within ninety days at an extraordinary general meeting appoint such auditor and such auditor shall hold office till the conclusion of the first annual general meeting.
There is no compulsion to file form ADT1 for Appointment of first Auditor of the Company
Appointment of Auditor in First Annual General Meeting and subsequent Annual General Meeting
every company shall, at the first Annual General Meeting, appoint an individual or a firm as an auditor who shall hold office from the conclusion of that meeting till the conclusion of its sixth Annual General Meeting i.e the time duration of Appointment of Auditor should be for 5 Financial year either in first Annual General Meeting of in Subsequent Annual General Meetings
Rotation of terms of Auditor:
The one term of Appointment of Auditor will be 5 Financial year
- an individual auditor who has completed his term of 5 year shall not be eligible for re-appointment as auditor in the same company for five years from the completion of his term;
- an audit firm which has completed its more than two terms of five consecutive years shall not be eligible for re-appointment as auditor in the same company for five years from the completion of such term:
Further as on the date of appointment no audit firm having a common partner or partners to the other audit firm, whose tenure has expired in a company immediately preceding the financial year, shall be appointed as auditor of the same company for a period of five years:
Companies meeting below criteria shall mandatorily comply with aforesaid provisions related to rotation of Auditors:
- Every Listed company
- all Unlisted Public Companies having paid up share capital of rupees ten crore or more;
- all Private Limited companies having paid up share capital of rupees 1[fifty] crore or more
- all companies (whether Public or private) having public borrowings from financial institutions, banks or public deposits of rupees fifty crores or more.
Appointment of Auditor in the Government Company:
Government Companies includes the Companies owned and controlled directly or indirectly, by the Central Government, or by any State Government, or Governments, or partly by the Central Government and partly by one or more State Governments.
First Auditor Appointment
The first auditor in the Government Companies shall be appointed by the Comptroller and Auditor-General of India within sixty days from the date of registration of the company.
In case the Comptroller and Auditor-General of India does not appoint such auditor within the said period, the Board of Directors of the company shall appoint such auditor within the next thirty days
In case of failure of the Board to appoint such auditor within the next thirty days, it shall inform the members of the company who shall appoint such auditor within the sixty days at an extraordinary general meeting, who shall hold office till the conclusion of the first annual general meeting.
Appointment of Subsequent Auditor:
For All Government Companies, Comptroller and Auditor-General of India shall, in respect of a financial year, appoint an auditor, within a period of one hundred and eighty days from the commencement of the financial year, who shall hold office till the conclusion of the Annual General Meeting.
Further the Provision for Appointment of Auditors in the Government Companies shall not be applicable to Deemed Government companies
Casual Vacancy of the Auditor in the Government Company Shall be filled by the Comptroller and Auditor-General of India within thirty days:
in case the Comptroller and Auditor-General of India does not fill the vacancy within the said period, the Board of Directors shall fill the vacancy within next thirty days.
Casual Vacancy of the Auditor in Non-Govt. Companies:
Casual vacancy can be created due to death, disqualification and resignation of Auditor.
Further if shareholders of the Company do not approve the appointment of Auditor in the AGM which has been recommended by Board of Director and the Audit committee of the Company, so such situation also falls under the ambit of the casual vacancy.
- In case of casual vacancy is caused due to the reason other than the Resignation of the Auditors: The same shall be filled by the Board of Directors of the Company within 30 days.
- In case of Casual Vacancy due to Resignation of the Director: In this Situation Board of Directors will recommend the Appointment of Auditor within 30 days from such vacancy and the /Shareholders at the General Meeting, which should hold within 3 months of such recommendation would approve such appointment.
The auditor appointed to fill the casual vacancy shall hold the office of Statutory Auditor till the conclusion of the Next Annual General Meeting.
If in Annual General Meeting, no auditor is appointed or re-appointed: In this situation the existing auditor shall continue to be the auditor of the company subject to the following situations:
- auditor is disqualified for re-appointment;
- he has given the company a notice in writing of his unwillingness to be re-appointed; and
- a special resolution has been passed at that meeting providing expressly that he shall not be re-appointed.
The situation arising from point a to c shall also be called Casual Vacancy of the Statutory Auditors.
Process of Appointment of Auditor:
- Send Proposal letter to Auditor;
- Obtain acceptance letter and eligibility Certificate;
- Conduct Audit Committee Meeting if applicable and Board meeting and recommend the Auditor Appointment to the Shareholders at Annual General Meeting;
- Conduct Annual general Meeting and pass the Resolution for appointment of Auditor;
- After Approval of Shareholders send the Appointment letter to the Auditor along with Certified true copy of the Resolution passed at Annual General Meeting with respect of such appointment.
Tags :Corporate Law